I also have spent my many years looking for a holy grail which can handle capital in billions. it is very hard to find edge in liquid stocks. I have not done much research on options. I guess if I have a little edge in the direction of stocks, that edge can be maximized if applied in option market. I believe medallion should have some edge predicting market short term movement and also applied that edge in option market too. If you could make money on market, you have to be able to predict something,either direction, range or vol,etc
Yup. I’ve combined some of my stock and SPY trading strategies, signals and experience with options, which is part of the edge I needed. Only figuring out which options to trade and how to hedge further was another challenge. And I forgot to mention previously that my stock trading strategies are quite accurate in terms of having consistent win rate. Say a strategy that wins 70% of the time continues winning 70% of the time over time. The only problem was that losses weren’t consistent and were exceeding those in backtests, so I needed to utilize options. There is one interesting strategy “VolatilityTrader” on C2 that sells puts when strong stocks drop. Seems risky and I think their max drawdown was 56%, but it can make up to 100% per year in profit. They also improved their risk management because previously they’ve tried to make like 200% per year. This year their drawdown wasn’t even too bad. Also didn’t mention earlier that there is a detectable and strong edge in shorting penny stocks, which made me understand why many traders claim to make $millions shorting penny stocks. The only issue is scalability, due to HTBs, overnight %interest, high margin requirements, and small market cap. Though human traders can do quite well with those, especially intraday.
Actually just looked again at that strategy on C2 and they don’t even seem to only sell puts anymore. I see some long positions as well. They probably revamped it and I may take a closer look later at how they trade now. They now seem to be able to make 100% per year with only 11% drawdown.
on equities I control risk by position sizing and news filtering. I seldom cut loss. my calculation indicates that stop loss order will incur 0.2% expense on average. I also do a lot of sell put to acquire stocks. what is the link of the volatilty trader on c2?
regarding indicators, I found macd is the best, with 0.1% return on average for each trade. the return on rsi actually is very slim.
I probably tried everything possible and I did have great strategies that would be very profitable over many years, but nothing that wouldn’t have a losing year, unless it was overfit. With a losing year or even several months, you don’t know whether the strategy no longer works or is it temporary loss. While not having losing years was my requirement to qualify as a holy grail.
I never tested strategies with such low return per trade. I've put lots of obstacles into my system, including high slippage that sometimes could be 0.1%, to make sure that I'd have high capacity and could accumulate shares (for example over a minute), and have some level of longer-term predictability. Then I'd exit with some profit the same day, but could also wait several days or weeks if needed, or depending on strategy. Many of my stock strategies would exit with very small profit, but only if they couldn't get higher profit. This wasn't my implementation, just the system fine-tuned itself to what worked best and that's where I saw it taking small profits where it couldn't get more within some time period, but mostly we're talking about several %, whether in wins or losses.